DON’T LOOSE YOUR TAX EXEMPTION

DON’T LOOSE YOUR TAX EXEMPTION

Distressed homeowners considering a short sale as their best way to avoid foreclosure have little time to act.  You may not be aware of the fact that normally any mortgage debt forgiven by a lender is taxable income.  So, IF you are successful in obtaining approval for the short sale of your, you could be facing a huge tax liability.

Fortunately, in 2007 Congress passed the Mortgage Debt Forgiveness Act, which exempts homeowners who are still occupying their homes from that tax liability.  Unfortunately, as things stand, that Act EXPIRES on December 31, 2012.  That means that in order for you to ensure that you avoid any potential tax liability for forgiven debt, you will have to sell your home, get short sale approval from your lender(s) and close escrow by the end of this year. That does not give you any time to think about it.  You will have to act NOW! 

There is always a chance that Congress will extend the Mortgage Debt Forgiveness Act.  However, they way Congress has been functioning over the past year or two, delaying a short sale and betting on the chance that the Act will be extended, is like playing Russian roulette with an automatic pistol. 

It takes time to complete the short sale process and although most loan servicers have made improvements in their handling of short sale requests, getting to the closing table in less than two months will be a difficult task.

If you have family members or friends who are having difficulty making their mortgage payments and are considering a short sale, usually the best way to avoid foreclosure, help them get in contact with an experienced Realtor who knows how to handle short sales.  One way to find such a Realtor is to go to www.CDPE.com (Certified Distressed Property Expert).  There is a page on that site that lists CDPE certified agents by city. 

Please tell them to HURRY!

For more information about the tax exemption select this link for the New Your Times article. http://www.nytimes.com/2012/10/21/realestate/mortgages-end-is-nigh-for-certain-tax-exemptions.html?ref=realestate&_r=0

If you have any questions about this subject, short sales or real estate in general, feel free to give us a call at (916) 337-0658.